Saturday, March 8, 2014

HOT: Whistleblower Threatens to Expose Corruption at Bitcoin Foundation; "I am ready to go nuclear."

ValleyWag reports:

If a breathless car chase wasn't cinematic enough to make you care about Bitcoin, how about a whistleblower threatening to publish an expose about corrupt elders and ominously signing off: "You have 72 hours"?
An "entrepreneur and former venture capitalist" who goes by the handle the Two-Bit Idiot declared "war" today in a blog post entitled Coup or Death for the Bitcoin Foundation? The blogger, whose name is Ryan Selkis, previously talked to Fortune's Dan Primack about leaking documents about Mt. Gox. In today's post, he threatened to publish a searing expose on Monday unless two of its board members resign. TBI also claims that the foundation's corporate sponsors "discouraged" him from airing Bitcoin's filthy laundry.
According to TBI, chairman Peter Vessenes and executive director Jon Matonis are not "ethically entitled" to retain their board seats in the Seattle-based non-profit because conflicts of interest and gross negligence. The most damning allegations are related to the disastrous implosion of Mt. Gox. 
TBI says Vessnes and Matonis got their money out through connections with Mt. Gox CEO Mark Karpeles, while $473 million swirled down the blockchain drain.
From TBI:

Not a happy Friday, Idiots.


I have been extremely outspoken about the illegitimacy of the Bitcoin Foundation’s current board of directors and the dire need for immediate changes.  Only a swift and thorough overhaul of the Foundation’s leadership can preserve Bitcoin’s image with regulators, legislators and the general public.  It is unacceptable that the current leadership has not already announced plans to exit gracefully from their positions of power, despite the glaring incompetence and negligence of Chairman Peter Vessenes and Executive Director Jon Matonis.

This must change.  Now.

Behind the scenes this week, I solicited the input of dozens of leaders throughout the industry who represent many of the corporate sponsors and lifetime individual members of the Foundation.  The individual response has been nearly unanimous: these gentlemen must go, immediately.  However, the corporate response has been understandably tepid.  Truly good and professional executives have been caught between a rock and a hard place: Vessenes and Matonis are obstinate individuals who will be hard to force from their positions, and a public battle will cause additional media backlash for Bitcoin, which will hurt these executives’ businesses.  

I have no similar fiduciary obligations to maintain the peace.

Moreover, I believe that it is only with proactive measures that we can truly wipe the slate clean from Mt. Gox.  Vessenes and Matonis are pioneers who deserve credit for their early work with the Bitcoin Foundation, but they have also outlived their usefulness in an industry that attempts to grow like the internet despite the inertia of the financial services community and the many regulatory and legislative roadblocks.

And for better or for worse, with all of its blue-chip sponsors and leading role to date in events such as the Senate Bitcoin hearings and NYDFS BitLicense hearings, the Foundation is the mouthpiece for the entire industry.

Peter Vessenes and Jon Matonis are not scapegoats.  They are not innocent bystanders.  And they are not ethically entitled to remain in their board seats through later this year.

On Monday, I plan to publish a full article which elaborates on these damning facts and much more:

1) The Foundation never once warned Bitcoin investors about keeping deposits in Mt. Gox, despite clear red flags dating back to at least April 2013. Nor did the Foundation craft or advocate for best practices such as technical transparency, deposit audits, or appropriate consumer protection disclosures. This was a colossal failure of leadership.

2) There is evidence that Bitcoin Foundation board members may have had direct access to Mark Karpeles which allowed them to personally deposit and withdraw funds from Mt. Gox, despite persistent delays for other customers.
Read the rest here.


  1. Everyone had to know that the insiders were getting their $ and their bitcoins out.

    The anonymous nature of the bitcoin makes it a playground for corruption of this kind.

    Good luck to all the fools being herded to the slaughterhouse by their great leaders.

  2. I'll admit that I was a staunch opponent of Bitcoin when it first hit the scene, but this was mostly due to a misunderstanding of Mises's regression theorem (I've since reconciled Bitcoin with Austrian theory). While I still am not anti-Bitcoin or pro-Bitcoin, and I have never held any bitcoins of my own, I do see Bitcoin in a far different light than I did just a few years ago.

    While I cannot say what the future of Bitcoin will have (or that of its corollaries, offshoots, improvements, influences, etc), I can say that it has created quite a stir. However, this "stir" is always just along the edges, whether it be by those who support it, or those who decry it. The simple fact is that nobody (and I mean NOBODY) has put it into any sort of positive economic analysis. Every "analysis" of Bitcoin thus far has been entirely exogenous and biased, which is important, but it is still lacking in the scientific rigor that I'd expect of somebody speaking or acting as an authority on the subject of value-free economics.

    In the case of your postings on the subject, Robert Wenzel, you have not exactly been wertfrei. This is not to say that your comments aren't useful, it is only to say that they have not been very helpful in terms of the Austrian tradition (nor have North's). Then again, I don't look to EPJ for rigorous economics, I look to it for lively economic commentary, which is the purpose of the site (I would surmise).

    1. Definition of "rigorous economics": Making it up as you go.

      [Bullshit to the power of 10...]

    2. I have thought about this, too, have come to think that BTC could grow into money that satisfies the regression theorem but it hasn't yet. It seems to me that the particular commodity service that the blockchain could provide is contract enforcement and, from there, money can arise. If BTC followed this path, then I think it satisfies the RT but the current history of BTC seems to be missing the crucial commodity step. Having said that, I happen to agree with Wenzel that the possibility of BTC following the slow path from commodity to money is dwarfed by the power of entrenched interests to destroy it. In fact, if it were to follow the contract enforcement path, it would run afoul of trial lawyers in addition the bank interests it threatens as a currency.

      If BTC were to follow the RT, I think it's only chance in subverting the US$ is in a high inflation environment. I wonder though, does BTC's reliance on technology become a weakness in a world of Zimbabwe-like inflation?

  3. merchants that accept Bitcoin is usually detailed with the true technology with perform. These kinds of coins signify the particular currency exchange themselves and so are the people transacted.